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U.S. Supreme Court
Milavetz, Gallop & Milavetz, P.A. v. United States, 2010 U.S. LEXIS 2206 (U.S. Mar. 8, 2010)
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) amended the Bankruptcy Code to define a class of bankruptcy professionals termed "debt relief agenc[ies]." 11 U.S.C. § 101(12A). That class includes, with limited exceptions, "any person who provides any bankruptcy assistance to an assisted person . . . for . . . payment . . . , or who is a bankruptcy petition preparer." Ibid. The BAPCPA prohibits such professionals from "advis[ing] an assisted person . . . to incur more debt in contemplation of [filing for bankruptcy] . . . ." § 526(a)(4). It also requires them to disclose in their advertisements for certain services that the services are with respect to or may involve bankruptcy relief, §§ 528(a)(3), (b)(2)(A), and to identify themselves as debt relief agencies, §§ 528(a)(4), (b)(2)(B).
The plaintiffs in this litigation -- a law firm and others (collectively Milavetz) -- filed a preenforcement suit seeking declaratory relief, arguing that Milavetz is not bound by the BAPCPA's debt-relief-agency provisions and therefore [*2] can freely advise clients to incur additional debt and need not make the requisite disclosures in its advertisements. The District Court found that "debt relief agency" does not include attorneys and that §§ 526 and 528 are unconstitutional as applied to that class of professionals. The Eighth Circuit affirmed in part and reversed in part, rejecting the District Court's conclusion that attorneys are not "debt relief agenc[ies]"; upholding application of § 528's disclosure requirements to attorneys; and finding § 526(a)(4) unconstitutional because it broadly prohibits debt relief agencies from advising assisted persons to incur any additional debt in contemplation of bankruptcy even when the advice constitutes prudent prebankruptcy planning.
Held:
1. Attorneys who provide bankruptcy assistance to assisted persons are debt relief agencies under the BAPCPA. By definition, "bankruptcy assistance" includes several services commonly performed by attorneys, e.g., providing "advice, counsel, [or] document preparation," § 101(4A). Moreover, in enumerating specific exceptions to the debt-relief-agency definition, Congress indicated no intent to exclude attorneys. See §§ 101(12A)(A)-(E). Milavetz [*3] relies on the fact that § 101(12A) does not expressly include attorneys in advocating a narrower understanding. On that reading, only a bankruptcy petition preparer would qualify -- an implausibility given that a "debt relief agency" is "any person who provides any bankruptcy assistance . . . or who is a bankruptcy petition preparer," ibid. Milavetz's other arguments for excluding attorneys are also unpersuasive. Pp. 5-9.
2. Section 526(a)(4) prohibits a debt relief agency only from advising a debtor to incur more debt because the debtor is filing for bankruptcy, rather than for a valid purpose. The statute's language, together with its purpose, makes a narrow reading of § 526(a)(4) the natural one. Conrad, Rubin & Lesser v. Pender, 289 U.S. 472, 53 S. Ct. 703, 77 L. Ed. 1327, supports this conclusion. The Court in that case read now-repealed § 96(d), which authorized reexamination of a debtor's attorney's fees payment "in contemplation of the filing of a petition," to require that the portended bankruptcy have "induce[d]" the transfer at issue, id., at 477, 53 S. Ct. 703, 77 L. Ed. 1327, understanding inducement to engender suspicion of abuse. The Court identified the "controlling question" as "whether the thought of bankruptcy was the impelling [*4] cause of the transaction," ibid. Given the substantial similarities between §§ 96(d) and 526(a)(4), the controlling question under the latter is likewise whether the impelling reason for "advis[ing] an assisted person . . . to incur more debt" was the prospect of filing for bankruptcy. In practice, advice impelled by the prospect of filing will generally consist of advice to "load up" on debt with the expectation of obtaining its discharge. The statutory context supports the conclusion that § 526(a)(4)'s prohibition primarily targets this type of conduct. The Court rejects Milavetz's arguments for a more expansive view of § 526(a)(4) and its claim that the provision, narrowly construed, is impermissibly vague. Pp. 9-18.
3. Section 528's disclosure requirements are valid as applied to Milavetz. Consistent with Milavetz's characterization, the Court presumes that this is an as-applied challenge. Because § 528 is directed at misleading commercial speech and imposes only a disclosure requirement rather than an affirmative limitation on speech, the less exacting scrutiny set out in Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U.S. 626, 105 S. Ct. 2265, 85 L. Ed. 2d 652, 17 Ohio B. 315, governs. There, the Court [*5] found that, while unjustified or unduly burdensome disclosure requirements offend the First Amendment, "an advertiser's rights are adequately protected as long as disclosure requirements are reasonably related to the State's interest in preventing deception of consumers." Id., at 651, 105 S. Ct. 2265, 85 L. Ed. 2d 652, 17 Ohio B. 315. Section 528's requirements share the essential features of the rule challenged in Zauderer. The disclosures are intended to combat the problem of inherently misleading commercial advertisements, and they entail only an accurate statement of the advertiser's legal status and the character of the assistance provided. Moreover, they do not prevent debt relief agencies from conveying any additional information through their advertisements. In re R. M. J., 455 U.S. 191, 102 S. Ct. 929, 71 L. Ed. 2d 64, distinguished. Because § 528's requirements are "reasonably related" to the Government's interest in preventing consumer deception, the Court upholds those provisions as applied to Milavetz. Pp. 18-23.
541 F.3d 785, affirmed in part, reversed in part, and remanded.
U.S. Court of Appeals for the Fourth Circuit
Nickey Gregory Co., LLC v. AgriCap, LLC, 2010 U.S. App. LEXIS 4587 (4th Cir. S.C. Mar. 4, 2010)
From Opinion:
Two sellers of perishable agricultural commodities, Nickey Gregory Company, LLC, and Poppell's Produce Inc., commenced this action under the Perishable Agricultural [*2] Commodities Act, 1930 ("PACA"), 7 U.S.C. §§ 499a-499t, to recover $ 106,696 owed them for the sale of produce to Robison Farms, LLC., a bankrupt South Carolina produce distributor. They named as defendant AgriCap, LLC, a finance company that provided secured financing to Robison Farms for working capital, and they demanded that AgriCap disgorge the proceeds of Robison Farms' accounts receivable held by AgriCap as collateral to secure repayment of monies advanced by AgriCap to Robison Farms. The two produce sellers claim that 7 U.S.C. § 499e(c)(2) created a trust for their benefit over the proceeds of their produce, including the accounts receivable that Robison Farms used for collateral in its arrangement with AgriCap, and that they therefore had a superior interest in the accounts receivable and proceeds held by AgriCap.
AgriCap claimed that it purchased Robison Farms' accounts receivable under a traditional factoring agreement and that it therefore held no assets of Robison Farms that were subject to a PACA trust. It also asserted as a defense that it was a bona fide purchaser for value.
The district court rejected AgriCap's position and found that AgriCap's arrangement with Robison [*3] Farms was a lending arrangement secured by Robison Farms' accounts receivable. Accordingly, it concluded that AgriCap held the accounts receivable as part of the PACA trust, the assets of which had to be used to pay unpaid commodities sellers before any other creditor.
For the reasons that follow, we affirm the district court's conclusion that Robison Farms' accounts receivable were held by AgriCap as collateral for a loan and therefore were subject to a PACA trust, but we disagree with the amount that the district court required AgriCap to pay the commodities sellers. Accordingly, we affirm in part, vacate in part, and remand for a reassessment of damages in accordance with this opinion.
United Rentals v. Angell, 592 F.3d 525 (4th Cir. Va. 2010)
United Rentals, Inc. ("United") appeals a district court order affirming a bankruptcy court judgment allowing the bankruptcy trustee to avoid and recover certain payments made to United during the 90 days prior to the bankruptcy petition. We affirm.
Our holding today is limited to the conclusion that United did not establish the § 547(c)(1) defense beyond the amounts determined by the bankruptcy court at the summary judgment stage. This holding makes perfect sense when viewed in the context of § 547(c)(1)'s purpose, to accommodate the need of financially unsteady companies to use checks to pay for new transactions. See In re Lazarus, 478 F.3d at 18; In re Smith's Home Furnishings, Inc., 265 F.3d at 965 n.4. The facts of this case, wherein the transfers were not made substantially contemporaneously with United's supplying of the equipment and parts that generated the debt, present a completely different scenario.
In Re: Jones, Debtor, 591 F.3d 308 ( 4th Cir. W. Va. 2010)
In his Chapter 7 proceeding, the debtor filed a statement of intention to continue payments on a vehicle purchased from the creditor but did not state whether he intended to redeem the vehicle or reaffirm the debt as required by §§ 362(h) and 521(a)(2). The district court held that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23, eliminated the ride-through option and that § 46A-2-106 was inapplicable. On review, the court affirmed, agreeing that the ride-through option was eliminated as applied to the present facts. When the debtor failed to timely redeem the vehicle or reaffirm the contract, the automatic stay was terminated and the creditor was free to take whatever action was permitted under the contract and West Virginia law. Further, the "ipso facto" clause could be enforced under § 521(d) when the debtor failed to comply with §§ 362(h) and 521(a)(2). Therefore, the filing of the bankruptcy petition constituted default under the agreement. Finally, the creditor was not required to give appellants notice of default and the right to cure under § 46A-2-106 because there was no ability to cure.
In Re: LAMBERT OIL COMPANY, INCORPORATED, Debtor, 2009 U.S. App. LEXIS 25939 (4th Cir. 2009) Opinion - Per Curiam
William E. Callahan, Jr., trustee (the "Trustee") of the bankruptcy estate of Lambert Oil Company ("Lambert"), filed an adversary proceeding in bankruptcy court seeking to recover the fair market rental value for two convenience stores which were assets of Lambert's bankruptcy estate. The bankruptcy court awarded judgment for unpaid rent in favor of the Trustee against Mountain Empire Oil Company ("MEO") and the district court affirmed. MEO now appeals. Because the factual findings of the bankruptcy court are not clearly erroneous and because the bankruptcy court did not err in awarding judgment to the Trustee for rent due from MEO for its pre-sale use and possession of the stores, we affirm the judgment of the district court.
In Re: NATIONAL GAS DISTRIBUTORS, LLC, 2009 U.S. App. LEXIS 2830 (4th Cir. 2009) OPINION
It is undoubtedly true that Congress sought in BAPCPA to effect greater protections of financial markets from the disrupting effects of bankruptcy and therefore to require a relationship between a commodity forward agreement and the financial markets. But this relationship need not be defined by trading in a market or on an exchange, as we have shown. See, e.g., Nagel, 217 F.3d at 438-39 (describing how nonassignable contracts can easily become tied into the broader financial market when one party turns around and passes along some of its price-volatility risks to a third party via another contract).
Thus, insofar as our holding precludes the bankruptcy court from requiring, in defining a "commodity forward agreement," that the contract be traded in a market or on an exchange or that it not involve physical delivery of the commodity, our holding does not define that instrument or hold that the contracts in this case are commodity forward agreements. We leave that to further legal and factual development on remand.
REVERSED AND REMANDED
In Re: BNX SYSTEMS CORPORATION, Debtor., 2009 U.S. App. LEXIS 2097 (4th Cir. 2009) OPINION - PER CURIAM:
The issue in this case is whether parol evidence may be offered to prove a term not expressly stated in an integrated contract. The bankruptcy court and district court declined to admit the evidence. We affirm.
In Re: MARYLAND PROPERTY ASSOCIATES, INCORPORATED, 2009 U.S. App. LEXIS 1398 (4th Cir. 2009) - OPINION - PER CURIAM:
In this case, a bankruptcy trustee seeks to avoid 24 financial transfers made by the bankruptcy debtors to Colombo Bank, F.S.B. ("the Bank"). The bankruptcy court ruled that the trustee could avoid the transfers and recover the assets from the Bank. The Bank now appeals and the trustee cross-appeals the district court's order affirming in part, reversing in part, and modifying the bankruptcy court order. We affirm in part and reverse in part.Sartin v. Macik, 2008 U.S. App. LEXIS 15959 (4th Cir. 2008)
In this case, we confront a question of North Carolina law that the state courts have yet to address. We must determine whether a state default judgment, entered as a penalty for a party's failure to comply with a North Carolina court's discovery order, has collateral estoppel effect in subsequent litigation in bankruptcy court. The bankruptcy court, in a decision upheld by the district court, found that the North Carolina courts would give collateral [*2] estoppel effect to the default judgment. For the reasons that follow, we disagree and therefore reverse the judgment of the district court and remand for further proceedings.
U.S. District Court Eastern District of Virginia
Bluemark, Inc. v. Geeks on Call Holdings, Inc., 2009 U.S. Dist. LEXIS 121984 (E.D. Va. Nov. 18, 2009)
Plaintiff, Bluemark, Inc. ("Bluemark"), brings this breach of contract, fraud and Racketeer Influenced and Corrupt Organizations Act ("RICO") action against Defendants, Geeks on Call Holdings, Inc. ("GOCH"), Geeks on Call America, Inc. ("GOCA"), Richard T. Cole, Richard Artese, and Keith Wesp (collectively "Defendants"), alleging misrepresentations and violations related to the franchise agreement between Bluemark and GOCH.
U.S. District Court Western District of Virginia
Summit Community Bank v. Blue Ridge Shadows Hotel & Conf. Center, 2009 U.S. Dist. LEXIS 32157 (W.D. Va. 2010)
MEMORANDUM OPINION
This case is presently before the court on an appeal from an order of the United States Bankruptcy Court for the Western District of Virginia dated November 30, 2009. The appellant seeks review of the bankruptcy court's order holding that certain materials furnished to a hotel were improvements and thus properly claimed in a mechanics' lien under Virginia Code § 43-3. Because the court concludes that the materials at issue were not improvements under the statute, the order will be reversed.
In re Accelerated Recovery Sys., 2010 U.S. Dist. LEXIS 21498 (W.D. Va. 2010)
MEMORANDUM OPINION
These consolidated bankruptcy appeals present the following questions regarding appellants 1 claims under the Fair Debt Collection Practices Act ("FDCPA"), [*2] 15 U.S.C. § 1692, et seq.:
1. Did the Bankruptcy Court err by finding that [a debt collection letter from appellee to appellant] did not violate 15 U.S.C. § 1692e(7) by falsely representing or implying that the consumer committed a crime or other conduct in order to disgrace the consumer?
2. Did the Bankruptcy Court err by finding that [debt collection letters from appellee to appellants] did not violate 15 U.S.C. § 1692g(a)(3) by failing to give [appellants] 30 days from the date of the receipt of the original communication from [appellee] to dispute the debt owed due to the bona fide error defense?
3. Did the Bankruptcy Court err by finding that the only damages asserted by [appellants] were [their] attorney fees?
U.S. Bankruptcy Courts
In re: GORDON PROPERTIES, LLC, 2010 Bankr. LEXIS 1777 (Bankr. E.D. Va. 2010)
MEMORANDUM OPINION
This case is before the court on Gordon Properties, LLC's Motion for a Preliminary Injunction to Enforce Automatic Stay and First Owners' Association of Forty Six Hundred Condominium, Inc.'s opposition. The debtor asserts that the unit owners association denied it the right to vote at the October 7, 2009 annual meeting in violation of the automatic stay, 11 U.S.C. §362(a), and requests that the annual meeting which was adjourned sine die be reconvened. The court will deny the motion. While the actions of which the debtor complains were an abuse of power, they were not an effort to collect a pre-petition debt.
In Re: Qimonda, 2010 Bankr. LEXIS 472 (Bankr. E.D. Va. 2010)
MEMORANDUM OPINION
The question presented is whether the automatic stay is applicable to an action pending before the International Trade Commission. The ITC argues that the action is an enforcement of its police or regulatory power and is excluded from the automatic stay. 1 11 U.S.C. § 362(b)(4).
1 Section 362(b)(4) excludes only acts under subsection 1, 2, 3 and 6 of § 362(a). Acts by governmental units covered under subsections 4, 5, 7 and 8 are stayed.
IN RE: CIRCUIT CITY STORES, INC., 2010 Bankr. LEXIS 44 (Bankr. E.D. 2010)
MEMORANDUM OPINION
The issue now before the Court in this Chapter 11 case is whether the Debtors may use § 502(d) of the Bankruptcy Code to temporarily disallow certain § 503(b)(9) 1 claims filed by a number of their creditors (the "Claimants"). The Debtors seek to have the claims filed by the Claimants temporarily disallowed up to the amount potentially recoverable on account of preferential transfers allegedly avoidable under § 547 (the "Preferential Transfers). Hearing was conducted on November 12, 2009 (the "Hearing") to consider Debtors' request for ruling on the threshold issue of whether § 502(d) can be used to temporarily disallow § 503(b)(9) claims.
In re Clements, 421 B.R. 755; 2010 Bankr. LEXIS 26 (Bankr. W.D. Va. 2010)
Decision and Order
It has long been recognized that HN3§ 1322(b)(2) prohibits a Chapter 13 debtor from modifying in any way the terms of an undersecured claim if that claim's only security is the debtor's principal residence. See Nobelman v. American Savings Bank, 508 U.S. 324, 332, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993). 3 Witt v. United Companies Lending Corp. (In re Witt), 113 F.3d. 508, 513 n. 5 (4th Cir. 1997) [*6] states "that by enacting § 1322(c)(2), Congress intended to create a limited set of exceptions to § 1322(b)(2)." While Witt recognized that § 1322(c)(2) was an exception to the anti-modification provision found in § 1322(b)(2), the Fourth Circuit, in denying confirmation for a plan nearly identical in substance to the Debtors' latest Chapter 13 plan, held that "§ 1322(c)(2) does not permit the bifurcation of an undersecured loan into secured and unsecured claims if the only security for the loan is a lien on the debtor's principal residence." Id. at 513-514. Pursuant to Witt, the Court holds that the Debtors' proposed bifurcation of the Rutherfords' Claim, as stated in their latest Chapter 13 plan, is not permissible and the plan cannot be confirmed. 4
....the Rutherfords' Objection to Confirmation is hereby SUSTAINED and confirmation of the Amended Chapter 13 Plan dated November 12, 2009, is DENIED.
In re: Bermuda Bay, L.L.C. and ABKDH, LLC, Debtors-in-possession, 2009 Bankr LEXIS 4215 (Bankr. E.D. 2009) - MEMORANDUM OPINION AND ORDER
On December 23, 2009, the court held a hearing to consider approval of debtors' disclosure statement filed on November 3, 2009, in these jointly administered bankruptcy cases. 1 The main objective of the hearing was to allow the parties to present their arguments to the court in light of the December 16, 2009, objection to the disclosure statement filed by creditor Wachovia Bank, National Association.
IN RE: BROOKLAND PARK PLAZA, LLC, 2009 Bankr. LEXIS 3241 (Bankr. E.D. Va. 2009) - MEMORANDUM OPINION
Wachovia Bank, National Association ("Wachovia") brought this adversary proceeding against Basheva Dresdner and Yehuda Gutman (the "Defendants") to collect on a defaulted loan made by Wachovia to Brookland Park Plaza, LLC (the "Debtor"). The loan was guaranteed by the Defendants. Before the Court is a motion by Wachovia for summary judgment. There are no disputed facts relating to Wachovia's prima facie case. In response to the motion for summary judgment, the Defendants have raised the affirmative defense of equitable estoppel. The Defendants allege that Wachovia breached certain oral agreements that it made with them, which agreements induced the Defendants to sign the guaranty agreements. The question for the Court is whether Defendants' allegations, which for purposes of this motion for summary judgment must be accepted by the Court as true, create a genuine issue of material fact that would preclude entry of summary judgment on Wachovia's prima facie case at this time. Wachovia contends that Defendants' allegations do not raise a genuine issue of material fact because any such oral representations or agreements are barred as a matter of law under both the statute of frauds and the parol evidence rule. The Court holds that the statute of frauds is inapplicable in this case, but given the application of the parol evidence rule, as discussed below, Wachovia is entitled to the entry of summary judgment against the Defendants.
In re: ON-SITE SOURCING, INC, 2009 Bankr. LEXIS 1698 (Bankr. E.D. Va. 2009) - MEMORANDUM OPINIONThe issue before the court is the extent to which a chapter 11 debtor may substitute a §363 sale for a chapter 11 plan. The debtor reached too far in this case. While the sale will be approved, those portions that are a substitute for a chapter 11 plan will be excised. This memorandum opinion supplements the oral ruling of the court disallowing the proposed unsecured creditors trust. In order to fully appreciate the §363 sale proposal, it is necessary examine the debtor's pre-petition sales efforts, the debtor's pre-petition debt structure and the debtor-in-possession's post-petition financing.
IN RE: CIRCUIT CITY STORES, INC., et al., Debtors., 2009 Bankr. LEXIS 237 (Bankr. E.D. Va. 2009)
The Court finds that the Debtors complied with § 366 of the Bankruptcy Code by proposing a means to provide an amount of adequate assurance in a motion filed at the start of the case. The Court concludes that it has the authority to enter a scheduling order setting forth an objection deadline and hearing date that allows for any dispute to be resolved prior to the 30-day deadline set forth in § 366(c)(2). As long as the Debtors provide the adequate assurance ordered by the Court by the thirtieth day, the Debtors will have complied with § 366 and the utility companies may not discontinue service. Under such circumstances it is appropriate for the Court to extend the injunction against disruption of utility service set forth in § 366(a) of the Bankruptcy Code beyond the thirtieth day after the Petition Date. See In re Syroco, Inc., 374 B.R. 60 (Bankr. D.P.R. 2007) ("A contrary interpretation would make it impossible for the [debtor] to satisfy Section 366 prior to the termination of the injunction period, when a utility company maintains silence."). The Procedures set forth in the Utility Order serve to streamline the reorganization process and do not adversely impair the rights of any utility company. The Utility Order is designed to avoid a haphazard and chaotic process whereby each utility could make extortionate, last-minute demands for adequate assurance which the Debtors would be pressured to pay under the threat of losing critical utility service.
